THE WEEK IN HEALTHCARE;COURT: ALA. BLUES EXEMPT FROM FULL-PAYMENT LAW

A federal judge has sided with Blue Cross and Blue Shield of Alabama in a ruling described as a victory for the state's growing managed-care industry.

The Blues plan, the state's largest health insurer, can continue refusing payments to hundreds of providers with which it does not have contracts, U.S. District Judge Seybourn H. Lynne in Birmingham decided.

In a decision that has gone largely unnoticed since its release Jan. 31, Lynne agreed with the insurer's arguments that it was exempt from a 1994 state law mandating full reimbursement to all physicians, dentists, pharmacists and other providers.

Blues spokesman Jim Brown said the not-for-profit corporation, which provides health coverage for more than 2.1 million people in Alabama, stood to lose $300 million in one year if subjected to the requirement.

Blues attorney Chris Kimble said Lynne's ruling was not only important to the Blues plan but would apply to virtually all insurers providing group health coverage in Alabama.

"It is probably one of the most significant managed-care cases," Kimble said. "People have been watching it all over the nation."

Wayne McMahan, executive director of the Alabama Dental Association, said patients would be unable to see the doctor of their choice under the ruling. The dental association is part of a coalition of medical groups fighting the Blues plan in court.

"That is why we definitely will appeal," McMahan said.

The Legislature passed a law in 1994 requiring health insurers to pay claims to doctors, dentists, pharmacists and other providers at the same rates, regardless of whether the insurer had a contract with the provider.

The Blues, which administers about 11,000 health plans in Alabama and also sells coverage, claimed it was exempt from the state law because it is governed by the Employee Retirement Income Security Act, a federal law that regulates employee health plans.

Blues attorney Kimble said virtually all group insurers are covered by ERISA. That means they, too, would be exempt from the state requirement.

The 1994 law "had the ability potentially to destroy managed care in Alabama," Kimble said. Barring a successful appeal, the industry can now continue to grow.

"It is inevitable that it is going to come. Some management has to occur if there are going to be benefits for anyone," Kimble said.

Brown said 7,500 to 8,000 Alabama providers have contracts with the Blues plan. About 80% of the state's physicians and dentists are part of the network, and an even larger share of pharmacists are covered, he said.

McMahan disagreed over the number of dentists participating in the Blues plan. He placed the number at slightly more than 30% of the state's 1,900 practicing dentists.

The Blues challenged the 1994 law by suing John O. Nielsen, a Cullman, Ala., dentist who requested payment although he did not have a contract with the Blues. The suit was expanded to include all the state's healthcare providers.